Taxpayers can’t afford John Chiang’s CalPERS proposal

No state government is more union-friendly than California, and that extends to the California Public Employees’ Retirement System, the nation’s largest pension fund.

CalPERS’ policy says it “supports and encourages fair wages and benefits for workers,” and “supports many of the ideals espoused by labor unions.”

But while CalPERS may look favorably on corporations with which it contracts that are union shops, the pension fund also makes clear that it won’t try to tip the balance in favor of labor by insisting that its contractors engage in collective bargaining. Its board’s duty to wisely steward the $323 billion pension fund would require no less.

But that reasonable policy could change under a far-reaching labor-backed proposal that is scheduled to go before the board on Wednesday. Treasurer John Chiang, a member of the CalPERS board and a Democratic candidate for governor in 2018, is pushing for the proposal.

At the board hearing last month, Chiang’s proxy on the board called for the policy so that employees for all contractors “would have the right to engage in collective bargaining going forward.” In a statement on Saturday, Chiang emphasized that he was asking CalPERS “to lead by emphatically encouraging” business partners to stay out of employee decisions regarding union representation.

Chiang defends the proposal as an antidote to President Donald Trump’s policies, saying in a statement: “As Trump and his labor department sides with those who can afford Mar-a-Lago, working Americans need a forceful voice to champion their interests.”

It’s all-too easy for a California Democrat to blame Trump. But Chiang’s proposal has the potential to create problems for this state, some of which are listed in a staff report. Would the labor provision be required for all contracts, or some? Would there be a dollar threshold? Who would monitor the program to ensure compliance? Who would investigate complaints?

Lobbyists from the Services Employees International Union, the California Labor Federation and the California School Employees Association spoke in favor of the measure. One of the labor lobbyists told the board that he would “discourage you from weakening the proposal,” noting that details had been discussed with the Treasurer’s Office.

CalPERS staff is rightly worried that adding such a requirement to CalPERS contracts would increase pressure on employers to unionize and step into an area pre-empted by federal law, specifically the National Labor Relations Act.

Ultimately, a demand of labor fidelity by CalPERS also could drive up costs for a retirement system that already is requiring state and local governments to pay billions more to cover retiree benefits.

Organized labor has a fundamental right to organize. In this Democratic state, most elected officials are solicitous of that right. But there is a line between supporting labor, and using the government’s power to tip the scales against private employers and in favor of labor. In this instance, Treasurer Chiang is stepping over that line.

Editor’s note: This editorial has been updated to clarify the proposal backed by state Treasurer John Chiang that goes before the California Public Employees' Retirement System board on Wednesday. The staff recommendation would add to CalPERS contracts – except those with investment managers – a provision that encourages, but does not require, management to stay neutral in labor organizing activities.